Gomme, Paul and Klein, Paul
Second-order approximation of dynamic models without the use of tensors
Journal of Economic Dynamics and Control, 35, (4), . (doi:10.1016/j.jedc.2010.10.006).
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Several approaches to finding the second-order approximation to a dynamic model have been proposed recently. This paper differs from the existing literature in that it makes use of the Magnus and Neudecker (1999) definition of the Hessian matrix. The key result is a linear system of equations that characterizes the second-order coefficients. No use is made of multi-dimensional arrays or tensors, a practical implication of which is that it is much easier to transcribe the mathematical representation of the solution into usable computer code. Matlab code is available from http://paulklein.se/newsite/codes/codes.php; Fortran 90 code is available from http://alcor.concordia.ca/pgomme/.
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